IF attitude is a little thing that makes a big difference, then the same can be said about credit unions, which as a sector has significantly consolidated over the years yet is determined to remain a viable alternative to the banks.
IF attitude is a little thing that makes a big difference, then the same can be said about credit unions, which as a sector has significantly consolidated over the years yet is determined to remain a viable alternative to the banks.
Leading the charge in Western Australia is Police & Nurses Credit Society, which reported a $20 million profit for the 2009-10 financial year – a 60 per cent increase from the previous year.
Police & Nurses chief executive Fred Huis told WA Business News that, while the society was not quite up to its pre-GFC level, he expects that to change by 2011.
“Police & Nurses is not profit-oriented, but we’re not benevolent [either], it’s just that we have a different model,” he said.
“We’re a mutual, set up to service the members, to give them the services the banks wouldn’t provide them.”
Mr Huis said the sector had changed considerably since he started with the society 30 years ago, with consolidation reducing the number of national credit unions from 800 in the 1980s to around 100 today; leaving only three WA-owned and operated.
Of those three, Police & Nurses is by far the largest, with 16 branches servicing 100,000 members and plans to open another branch in Innaloo in October.
The remaining two locally run credit unions are University Credit Society (Unicredit), which has four branches accessed by 10,000 members, and Goldfields Credit Union, which services 2,400 locals in Kalgoorlie and Esperance.
While openly conceding that the sector will never be as big as the banks, which capture 90 per cent of the market, Mr Huis said credit unions were a good alternative.
“[Former Commonwealth Bank boss] David Murray once said, ‘Yeah we make mistakes and we lose customers but they’re just the crumbs’,” Mr Huis said.
“Well those crumbs are big loaves for us. So if they lose a few thousand customers, when they have two or three million customers it doesn’t make any difference. For us that makes a lot of difference.”
Melbourne-based Big Sky has a third of its membership based in WA after merging with BP’s credit union in Kwinana in 2003, and also has a presence in the rural towns of Hedland and Newman.
Big Sky chief executive Tony Ryan said the sector’s reduced numbers was not due to failure of any particular society, but rather in response to regulation.
“There are a few drivers [of consolidation]; one of those is regulation – credit unions are regulated by APRA, just like the banks,” he said.
“That brings with it an extra layer of cost and expertise, which can be difficult if you are a small credit union.”
Mr Ryan said the major banks were very strategic through the GFC and “scooped up a number of their competitors, like St George”, therefore it become harder for societies to compete.
Industry body Abacus is quick to point out that the mutual structure means no tension between servicing members and external shareholders – members are the owners.
In its latest industry fact sheet, Abacus reported that the customer satisfaction gap was widening, with credit unions consistently outperforming the banks by about 10 per cent.
Former Bankwest executive Chris Whitehead, who heads Australia’s largest credit union, Brisbane-based CUA, told WA Business News there was a constant trade-off between shareholder interests and customer interests for the banks, whereas there was no such conflict for societies.
“In the typical larger banks, 60 per cent of profits are taken out each year in the form of dividends, but all of our profits go back into the business,” Mr Whitehead said.
WA’s second largest credit union by member numbers is Adelaide-based United Community, which has 14 branches in WA after merging with United Credit Union in 2008
United chief executive Robert Keogh said that despite having a strong relationship with its members, the sector’s biggest issue was that the rest of the public didn’t understand what was on offer.
“Once we are able to break that barrier, they rate our service very highly – the relationship we have with them is very different to what they might experience with the banks and that gives us a strong footing,” he said.
Mr Huis agreed, and said that Police & Nurses’ intention was not to be ahead of the banks, but to be different.
“We’re not an aggressive organisation, but I wouldn’t say we’re passive – we’re still here, we’re independent and we’re doing well,” Mr Huis said.
